Startup India

SoftBank set to take control of WeWork with $1.7 billion payout for ousted CEO

SoftBank would be looking to allocate $4 billion to $5 billion in additional funding in WeWork and buy existing shares.

The company is closing non-core businesses and divesting assets including Neumann’s private jet to immediately cut costs.

Former CEO of troubled co-working startup WeWork Adam Neumann will get nearly $1.7 billion from SoftBank to detach himself from the company and relinquish his voting rights as the Japanese investor got approval from the company’s board to take control of it, according to a report by The Wall Street Journal. As part of the deal, the Japanese investor will pay $1 billion to Neumann for his shares along with $185 million consulting fees and another $500 million in credit to help him pay JPMorgan loans.

SoftBank would be looking to allocate $4 billion to $5 billion in additional funding in WeWork and buy existing shares, CNBC reported, even as the value of WeWork this time would be around $7.5 billion to $8 billion — a drastic fall from around $47-billion that the company was valued at before its unsuccessful IPO.

WeWork had reported $1.54 billion in revenues and over $900-million in net loss in its IPO prospectus in August this year. The $900 million loss was in the first six months of 2019. Without funding, WeWork is poised to be left with no money by mid-November, CNBC had reported.

The company is closing non-core businesses and divesting assets including Neumann’s private jet to immediately cut costs. Earlier this month, the company said that it would shut its Manhattan private school, WeGrow next year. The company in its prospectus revealed that it had $22 billion in long term liabilities as of June 30 including $17.9 billion of it in long-term leases.

According to a May report on the flexible office market by real estate company, CBRE WeWork had added nearly 11 million square feet space since the second quarter of 2018 that led to WeWork having 33 per cent of this market. This made WeWork close to twice the size of its closest rival Regus that was founded two decades back.